A demonstrator holds a large Venezuelan flag outside Congress on January 5, 2026, in Caracas, Venezuela, on the day ousted U.S. President Nicolas Maduro appeared in a New York courtroom and Vice President Delcy Rodriguez was formally sworn in as the country’s interim president after being ousted from power by the Trump administration.
Maxwell Briseno | Reuters
Venezuela’s long-term defaulted bonds have suddenly become one of the hottest deals in emerging markets.
The price of the country’s standard bonds due in October 2026 soared to about 43 cents to the dollar, more than doubling since August. The rally came as traders reassessed prospects for a recovery in distressed securities following the sudden ouster of President Nicolas Maduro and a U.S. policy shift that opened the door to a possible restructuring of the national debt.
Investors are betting that a faster-than-expected political transition and a clearer path to asset recovery could unlock values that have been frozen for nearly a decade. Venezuela defaulted at the end of 2017 after failing to make payments on foreign bonds issued by the government and state oil producer PDVSA. Fidelity Investments and T. Rowe Price are reportedly among the holders of large amounts of these defaulted bonds.
Donato Guarino, emerging markets strategist at Citi, said uncertainty remained, particularly with persistent questions about the new administration’s political alignment with Washington.
“The key for the Trump administration is to extract the oil reserves that Venezuela currently has. That means higher GDP for Venezuela, which means higher ability to pay bondholders,” Guarino told CNBC. “But in the short term, there may be some risks because President Trump’s actions are a big gamble. There is a question of the current new president’s loyalty to Trump.”
In recent days, President Trump has reiterated the United States’ commitment to “run” Venezuela, threaten Colombia and Cuba, and acquire Greenland. These comments came after President Maduro was detained from Caracas following a military attack over the weekend and taken to the United States to face criminal charges without prior approval from Congress.
big risks remain
Barclays has upped its Venezuelan bonds to current prices after the rapidly evolving political situation changed its outlook.
The Wall Street firm also warned that the size and complexity of Venezuela’s debt overhang could limit upside from here. Venezuela and PDVSA have a combined $56.5 billion in unsecured eurobonds outstanding, according to Barclays. Based on the IMF’s 2025 GDP projections, the total bill for bondholders, including interest on arrears, amounts to $98.3 billion, or about 119% of GDP.
The bank noted that Venezuela’s economy has now shrunk by about 30% and oil production has nearly halved over the past eight years, and said the value of the recovery could vary widely. As a result, the ultimate recovery will largely depend on how quickly the economy and oil sector can recover in the coming years.
Jeffrey Sherman, DoubleLine’s deputy chief investment officer, believes the stock’s rise may be ahead of reality.
“There’s still a lot of risk there. This is the kind of continued leadership that we have right now,” Sherman said on CNBC’s “Money Movers” on Tuesday. “We’ll see how that transition impacts things like elections. So, again, I think it’s too early to get too excited about that, especially as a fixed income investor.”
Recent developments in Venezuela could also be a big win for Elliott Investment Management, founded by billionaire investor Paul Singer. Less than two months ago, the investor known for cutting lucrative deals in high-risk markets won U.S. approval for a $6 billion bid for state-owned PDVSA-owned refiner Citgo Petroleum.
— With assistance from Gina Francola
